Everything you need to know about ABS and FFS - CHOICE # 370

What is equally important, other than the fees and charges in investment cost, in the selection of a MPF scheme?

Its performance, naturally, which will ultimately determine the size of the payout one will receive on retirement.

The Consumer Council, in a sequel to its earlier study on the fees and charges of MPF funds, has produced yet another comprehensive report aimed at raising consumers' awareness and understanding of the performance of their MPF investment.

Under the effect of continuous compounding, even a slight 1% difference on annualized MPF return would result in a huge difference on the accrued benefits over the years.

Consumers are therefore urged to pay close attention in the evaluation of MPF performance to, first and foremost, their Annual Benefit Statement (ABS).

The ABS is required, in compliance with the "Code on Disclosure for MPF Investment Fund", to be distributed by post at least once every year to all scheme members.

In addition, scheme members must receive also two copies of Fund Fact Sheet (FFS) each year.

The Council has found that the layout and information contained in the ABS are anything but standardized among the various MPF service providers.

For example, some service providers do not indicate the profit and loss in the MPF account. Scheme members are left to do their own calculations in order to find out.

Consumers will do well to note that some MPF service providers offer various aids (e.g. ABS reading guide and glossary), while others provide such means as on-line channels and telephone hotlines to facilitate scheme members to check their MPF accounts and performance.

Further, as unit fund price listed on the ABS may not be the most updated, for the latest information, scheme members can visit the website of their MPF service providers, or the Mandatory Provident Fund Schemes Authority, or read in newspapers.

The FFS, on the other hand, provides another importance source for MPF performance evaluation, and must include crucial information on: investment objective, fund performance information, latest FER (fund expense ratio), top 10 portfolio holdings, risk indicator, etc.

In the study, it was found that the information disclosure and presentation method vary among the FFS, as well as the extra marketing materials which can be either downloaded from websites or obtainable from service branches.

Scheme members should distinguish the difference between the mandatory and additional sets of information. For example, the additional marketing information may not include the top 10 portfolio holdings and risk indicator as required in the FFS.

Also, the concept of risk indicator may be different. Unlike FFS using annualized standard deviation as the risk indicator, fund marketing materials may simply apply risk level without any reference to standard deviation.

In the report are illustrated in great detail with examples of ABS and FFS to help guide consumers to better understand these documents of importance in retirement investment. Read them with care. Or, ignore them at your own peril.

Included in the report is also useful advice and tips in respect of voluntary MPF contribution, and MPF portfolio switching.

For making voluntary MPF contribution, scheme members are advised that they can freely choose their desired MPF service providers without confining to only the MPF provider selected by the employer.